BiH utility sends third termination warning to Chinese contractor on Tuzla 7 coal power project

State-owned power utility Elektroprivreda BiH (EPBiH) has sent a third termination warning notice to the Chinese contractor on the 450 MW Tuzla 7 coal power plant project.

A consortium of Chinese companies Gezhouba Group and Guangdong Electric Power Design Institute (GGGC-GEDI) has been issued three termination warning notices for the 2014 contract, with the consent of the FBiH Government, Elektroprivreda BiH said. It added that the consortium has been asked to fulfill its obligations and implement the contract.

EPBiH recalled that the consortium had previously informed EPBiH that it could not fully implement the engineering, purchase and construction (EPC) agreement because its key equipment supplier had pulled out of the job.

General Electric (GE), which was supposed to deliver the boiler, turbine, and generator, withdrew from the project a long time ago, and EPBiH believes that the offered alternative subcontractors of key equipment do not have the required track record, know-how, and experience for the implementation of the project.

EPBiH: The proposed suppliers do not have the required track record for the project

EPBiH has made the decision based on an assessment by an expert team established for negotiations with the contractor, as well as with the support of the Government of the Federation of BiH, the company said.

In September 2020, the Chinese consortium informed EPBiH of the withdrawal of GE and proposed alternative subcontractors during 2021 and 2022, the power utility said.

EPBiH also said that it would take further steps to protect the interests of the company, and the Federation of BiH, based on further actions of the consortium.

Unit 7 was planned as a replacement for EPBiH’s outdated coal power plants and as a source of electricity and heat for the city of Tuzla and the surrounding area.

The Tuzla 7 project has also had problems with loan guarantees

In addition to delays due to suppliers, the Tuzla 7 project has also had problems with financing and state loan guarantees. In 2019, the Secretariat of the Energy Community initiated a dispute alleging that the project had received illegal state aid. BiH Council for State Aid initially claimed that the aid was legal, but later said that it was not.

However, at the beginning of this year, the Court of BiH overturned the Council’s decision on illegality.